The U.K. government pledged to address the country's chronic housing shortage with a raft of measures, including planning reform and help for first-time buyers, that were announced by Chancellor Philip Hammond in the country's annual budget.
A package of investment, loans and guarantees worth £44 billion will aim to boost the number of homes built each year from 217,000 in 2016 to 300,000 by the middle of next decade. Reform of the planning laws will increase new construction by targeting homebuilders sitting on land that has already received building permission.
Those struggling to get on the housing ladder will be helped by the elimination of the 3% stamp duty — a levy on property purchases — for first-time buyers of homes below £300,000. For first-time buyers in high-price areas like London, there will be no stamp duty on the first £300,000 of the purchase price of properties up to £500,000.
"House prices are increasingly out of reach for many," Hammond said in a speech to the House of Commons. "It takes too long to save for a deposit. And rents absorb too high a portion of monthly income. So the number of 25 to 34 year olds owning their own home has dropped from 59% to just 38% over the last 13 years. Put simply, successive governments over decades have failed to build enough homes to deliver the homeowning dream that this country has always been proud of. Or, indeed, to meet the needs of those who rent. So today we set out an ambitious plan to tackle the housing challenge."
A U.K. government policy document published in February titled "Fixing our broken housing market" said that the U.K. has failed to build the estimated 225,000 to 275,000 new homes needed every year to keep pace with population growth, with an average of 160,000 new homes delivered each year since the 1970s. The average cost of a house is now at a record 8x average earnings, pushing the number of people living in the private-rented sector to double since 2000, it said.
Responding to the chancellor's measures on housing, Ian Fletcher, director of real estate policy at the British Property Federation, said in an emailed statement: "The housing crisis didn’t happen overnight and won’t be solved in a day. We welcome the commitment from the Chancellor today to long-term solutions, and actions that seek to take that commitment forward. What excites us is the commitment to infrastructure, the opportunities that places like Oxford-Milton Keynes-Cambridge will provide, and the more flexible use of government support through measures like guarantees, to support housing delivery."
Fletcher also welcomed the government's move to support first-time buyers through the scrapping of the stamp duty, but criticized the chancellor's failure to use changes to stamp duty strategically to stimulate supply. "[Stamp duty land tax] is a transactional tax, an explicit barrier to social mobility, putting people off moving house. It’s also deterring investment into housebuilding, which ultimately has a knock-on effect on the volume of affordable housing provision."
Stamp duty is also restricting the growth of the U.K.'s nascent build-to-rent sector, Fletcher said, with institutional investors being discouraged from committing more of their capital at a crucial stage in its development. “While we are delighted with the recognition and support now being given by the government to the build-to-rent sector, the 3% surcharge remains an unnecessary and counter-productive barrier to a sector with billions of pounds available to deliver high-quality rental homes.
"If the Chancellor is not brave enough to abolish it completely, then the first priority should be changing the guidelines that homes built for affordable private rent (the rental version of affordable housing) are subject to the 3% surcharge. The chancellor should cut the surcharge for this tenure to encourage the provision of greater levels of accessible homes.”
